Bank of Ireland has insisted it is making “substantial strides” restructuring
its operations after full-year losses narrowed in 2011.

The banking group said it had begun to attract deposits and cut costs following Ireland’s devastating property crash, which sent a shockwave through the country’s banking sector during the financial crisis.

The bank said it also expected home loan arrears to peak in 2012 despite ongoing economic uncertainty.

Bank of Ireland posted a €190m (£159m) pre-tax loss in the year ending December 31 as the banking industry continued to struggle. This is down from a €950m loss a year earlier.

However, underlying operating profit, which excludes impairment charges on its financial assets and sales of non-performing loans to Ireland’s National Asset Management Agency, the “bad bank” dealing toxic assets, fell to €411m during the period, down from €1.01bn in 2010.

Richie Boucher, chief executive, remained upbeat about the Bank of Ireland’s outlook.

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However, he added: “Trading conditions in our Irish and UK markets remain challenging with economic growth now forecast to be lower than previously envisaged and weak consumer and business confidence in the domestic economies continuing to prevail.

“This is adversely impacting on the demand for our products and progress towards the normalisation of impairment charges in our loan books.”

Bank of Ireland was the only Irish bank to escape falling into state control.

The lender said its deposits grew by €8bn in the second half of 2011 to €71bn, mostly down to the performance of its UK unit.

The level of arrears among properties bought by investors to rent out almost doubled to 10.8pc. However, Mr Boucher said he expected this to peak this year with unemployment stabilising, albeit at high levels.

“We are very realistic about the challenges that we face which are big but they are much more 'business as usual’-type challenges than we faced a couple of years ago,” he added.